KUALA LUMPUR (June 24): Serba Dinamik Holdings Bhd today announced that KPMG has resigned as its external auditor with immediate effect after the audit firm served the written notice to the group yesterday (June 23).
In a Bursa Malaysia filing today, KPMG highlighted the suit filed by the group on June 22 against it in regard to the ongoing statutory audit of the company for the financial period ending June 30, 2021 compromised its ability to independently continue the audit engagement and discharge its professional duties as auditor of the company.
"The company is currently identifying the new auditors to be engaged pursuant to Section 271(2)(b) of the Companies Act 2016 and will make an immediate announcement to this effect immediately upon the finalisation of appointment of the new auditors," the group said.
To recap, Serba Dinamik has been embroiled in an auditing dispute with KPMG, after its external auditor highlighted discrepancies involving transactions to the tune of RM4.54 billion to the company's independent directors last month.
The issues raised were based on the financial accounts for the financial year ended Dec 31, 2020.
Subsequently, Serba Dinamik called for a press conference to announce that its board had decided to take legal action against KPMG, alleging that the external auditor had been negligent and breached its contractual and statutory duties to the group.
Serba Dinamik's legal consultant Tan Sri Muhammad Shafee Abdullah claimed that KPMG had raised the red flags in an inappropriate manner.
Meanwhile, the group's newly appointed chairman Datuk Mohamed Ilyas Pakeer Mohamed claimed that the external auditor "has blown the audit issues out of proportion".
In response to queries from theedgemarkets.com, KPMG said the suit had no legal basis and it would firmly refute the allegations if the matter goes to court.
"The potential claim relates to a statutory audit that is still in progress and we are unable to make any comments. The audit is being conducted in accordance with the relevant professional standards.
"We see no basis for it and will vigorously contest any court proceedings," it said.
Yesterday, the Securities Commission Malaysia (SC) said in a statement that auditors are required by law to report to the SC if it finds any material issues, or if there are any potential breaches of securities laws and rules of the stock exchange.
"In light of recent events, the SC wishes to reiterate that under the Capital Markets and Services Act 2007, auditors have a statutory obligation to immediately report to the SC, if they reasonably believe that there are any matters which may constitute a breach or non-performance of any requirement of securities laws, rules of the stock exchange or any matter which may adversely affect to a material extent, the financial position of the listed company.
"The SC's Audit Oversight Board also stated that external auditors play an important role in promoting confidence in the quality and reliability of audited financial statements in Malaysia.
"As such, auditors should be allowed to carry out their responsibilities and render their independent opinion without fear or favour, and discharge their duties free from any retaliation," the regulator said.
In a separate statement, Bursa Malaysia also reiterated that it is "imperative" that Serba Dinamik appoints an independent reviewer to address the uncertainty and provide clarity to the market.
"To provide clarity to the market, it is imperative that Serba Dinamik undertake the necessary steps to appoint the independent reviewer immediately to address the uncertainty surrounding the veracity and accuracy of the matters as highlighted by its external auditors, in a timely manner.
"In this regard, Bursa Malaysia has issued a query to Serba Dinamik today to request a status update and time frame in relation to the appointment of an independent reviewer.
"The exchange is committed to ensuring the proper dissemination of accurate and timely information to the capital market," the stock exchange operator said.
On June 14, the group agreed in principle to appoint Ernst & Young Advisory Services Sdn Bhd as an independent reviewer to assess the veracity and accuracy of the issues highlighted by its external auditor KPMG PLT with regard to its FY20 financials.
At noon break today, shares in Serba Dinamik fell 3.5 sen or 5.88% to 56 sen, valuing the company at RM2.07 billion. Year-to-date, the stock has fallen by 68%.
Serba Dinamik plunges 10% following news of KPMG's resignation as external auditor
Serba Dinamik to take legal action against external auditor KPMG for alleged negligence
Amid suit against KPMG, Serba Dinamik yet to appoint EY for independent review
No basis for legal action, says KPMG on Serba Dinamik suit
KPMG says audit was proper and will contest Serba Dinamik’s suit — but can a company sue its auditor?
SC says Serba Dinamik probe ongoing and auditors must do their work without fear or favour
Serba Dinamik’s EY appointment could be a baby step to many unforeseen discoveries
MICPA says auditors must be allowed to complete their task without being intimidated
KPMG quits as Serba Dinamik auditor; it's now up to SC to uncover the truth